Question: A friend of mine told me he's buying Silicon Graphics because of the concern over terrorism. What is your opinion? Are there other stocks I should buy?

A BuyandHolder

Answer:

Dear BuyandHolder,

It is true, that there are always specific companies (and often specific industries) that benefit from increased spending, no matter what the reason for the spending. This may indeed be true with the rise in homeland defense expenditures or the possibility of war in Iraq -- duck tape manufacturers are pretty happy right now. However, a short blip is not enough to sustain a company. The duck tape folks will need something else to sell as the country relaxes a bit. A company still needs to have increased earnings and moderately low debt to survive in this environment.

About Silicon Graphics

Regarding Silicon Graphics (SGI), this Mountain View, CA company announced just recently that it had signed the largest defense contract in its history. (The company has been around for over 20 years.) The deal is for $21 million worth of software, supercomputers and other items for the Defense Department. The company has about 4,000 employees.

One of the interesting things Silicon Graphics has come up with is a visualization technology that gives our military people a 3-D look at Saddam Hussein's palaces and other key landmarks in Baghdad.

The theory is that if we go to war, this software will be used elsewhere.

Defense business now contributes about 35% of SGI's revenue, up from 20% this time last year. The 52-week high and low: $4.85 and $0.56. Revenues increased 9% in the last quarter, ended December 27, 2001.

Finding Other Companies

One way you can track what new developments are taking place with various publicly traded companies is through the search engine www.google.com. Type in the name of the company in the search box and then hit the "News" button. This will take you to recent articles about the company.

If you are a regular reader of this column, you also know that I frequently recommend Value Line Investment Survey. Independent analysis of over 1,700 companies are arranged by industries and updated weekly. This is a print-only publication, available at most libraries. You'll also find information at: www.valueline.com.

BUYandHOLD does not offer or provide any investment advice or opinion regarding the nature, potential, value, suitability or profitability of any particular security, portfolio of securities, transaction or investment strategy. Any investment decisions you make will be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance, and liquidity needs. The security and information listed above and is being provided for informational purposes only and should not be regarded as an offer to sell or as a solicitation of an offer to buy and past performance is no guarantee of future results.